Decentralized finance (DeFi) lending applications are experiencing a surge in active loans, reaching a record $23.723 billion on May 21, according to data from Token Terminal. This growth in outstanding loans began in early April, coinciding with a broader uptick in crypto prices.
The DeFi ecosystem’s total value locked (TVL) currently stands at $180.4 billion, which is 6.4% below the level recorded on January 31. This date is significant as it marks the day before President Donald Trump announced proposed import tariffs, which had a negative impact on both Bitcoin and DeFi TVL.
The increase in active loans can be attributed to a growing demand for leverage among traders looking to finance their positions in assets like Bitcoin and Ethereum. Many borrowers are using stablecoins to capture yields from liquidity mining and basis trades. This trend has led to a rise in loan balances on platforms like Aave, Morpho, and Compound.
It is important to note that the collateral for these loans is factored into the TVL calculations, which can sometimes mask the true growth in credit activity. This phenomenon highlights the use of on-chain leverage using lending protocols.
Lending yields on platforms like Aave and Morpho-Aave have been attractive, hovering between 6% and 8% annualized since April. This has drawn stablecoin deposits away from passive reserves and into lending pools, further fueling the increase in loan balances.
Despite the record $23.723 billion in active loans, the TVL remains slightly below its late-January peak. This indicates a market where credit demand is accelerating, while aggregate collateral levels are still recovering from the impact of the import tariffs.
Overall, the DeFi lending space continues to evolve, with traders leveraging decentralized platforms to access credit and maximize their yield-generating opportunities. The growth in active loans underscores the increasing role of permissionless credit in the crypto-native ecosystem.